Imagine you could travel back in time to any year you wanted. Maybe you have a time machine or a special power. Which year in history would you choose to travel back to?
Before you jump to your favorite costume’s era, consider the years when savvy traders made hundreds of thousands, even millions, almost overnight from the financial markets, simply because they made the right trade at the right time.
Wouldn’t you want to go back to these events in time and set yourself up for life too? Here are three times you could have struck gold if you’d been there, done that! Keep them in mind in case you ever find yourself time-travelling in a DeLorean.
Black Monday, in 1987
October 19th, 1987, all 23 major world markets suddenly crashed. 8 markets took a 20-29% hit, 6 dropped by 30-40%. Hong Kong experienced a sharp 45.8% decline. It would forever be remembered as Black Monday.
Today it may be a shopping extravaganza, but Black Monday was one of the most severe and unexpected economic market crashes in modern history. Most traders didn’t see it coming, and if they had, only a few could have predicted its magnitude.
But Paul Tudor Jones was one of the few. While Wall Street remained either oblivious or unprepared for the bubble to burst, Paul Tudor was spending hours huddled over graphs analyzing historical market data with his team at the Tudor Group. They spotted direct comparisons to the 1929 crash, and they predicted it would happen again.
Two weeks before the crash, the Tudor Investment Group began aggressively trading against the markets. By the close of business on October 19th, the Dow Jones had dropped a whopping 22% in one day, its largest-ever percentage drop at the time. Television studios had to redraw their TV graphs to reflect the new lower limits it had hit.
Paul Tudor Jones walked away with upwards of $100 million and a reputation as one of the shrewdest traders in the world who had pulled off one of the greatest trades in Wall Street history.
Breaking the Pound, in 1992
The 1990s was a time of tumultuous currency markets in just about every corner of the world.
At the time, the U.K. was considering joining the monetary union, the Euro. The E.U. had a currency control mechanism (known as the exchange rate mechanism), designed to keep the major currencies there within a relative range of value with each other.
With an economy on the verge of a downturn, the U.K. struggled to keep the British pound within the appropriate range of the German mark, whose value had been inflated by very high-interest rates connected to the borrowing costs of German unification.
Enter George Soros, an active currency trader, who began massively and relentlessly short-selling the British pound. The British government fought back by raising interest rates and intervening in the markets.
But the currency had been severely devalued, and the traders eventually prevailed making millions. Britain quit the European Exchange Rate Mechanism, and for his part in the fall, Soros reportedly made a billion dollars. Soros remains one of the richest traders in the world.
The Start of the Great Recession, 2007
The US subprime mortgage market crash sent shockwaves throughout the globe. Traders and investors were facing massive losses, selling stocks and panicking. Some saw their portfolio values drop by as much as 40% hence the panic.
This resulted in rock-bottom prices, and while anyone who could get out was getting out some traders were prepared to go against the popular wave and make investments that set them up for life.
Warren Buffet, John Paulson, and Jamie Dimon, all bought huge amounts of stocks at big market discounts and made hundreds of millions in the process.
Hedge fund manager John Paulson made a spectacular bet against the U.S. housing market that made him an estimated $15 billion during the crisis. Goes to show you that, traders who can go long can make a big profit.
So, if you ever are whisked back to the year 2007, remember, short the US housing market or buy massive amounts of Netflix, Amazon and Apple stock. Your future self will thank you.
While these are major events, and chances of a trader taking advantage of them are incredibly low, day-to-day trading is all about finding opportunities and catching them at the right time with the right trade. So, what will your next trading move be?
Provided by Axiory